Trading Out of Sight: An Analysis of Cross-Trading in Mutual Fund Families,

with Alexander Eisele, Gianpaolo Parise, and Kim Peijnenburg  

Journal of Financial Economics,  forthcoming

Media coverage: Bloomberg, Reuters,
Major conferences: AFA (2014), EFA (2015), FIRS (2016), the 9th Paris Annual Hedge Fund and Private Equity Research (2016)

This paper explores the incentives for mutual funds to trade with sibling funds affiliated with the same group. To this end, we construct a dataset of almost one million equity transactions and compare the pricing of trades crossed internally (cross-trades) with that of twin trades executed with external counterparties. We find that cross-trades are used either to opportunistically reallocate performance among trading funds or to reduce transaction costs for both counterparties. The prevalent incentive depends on the intensity of internal monitoring and the market state. We discuss the implications for the literature on fund performance and the current regulatory debate. 


with Giuseppe Pratobevera

Conferences:  2018 JCF Special Issue Conference, The Hong Kong Polytechnic University, SFI Research Days (Gerzensee, 2018), Northern Finance Association Conference (Charlevoix, 2018)

We document a robust buy/sell asymmetry in the choice of the broker in the IPO aftermarket: institutional investors are less likely to sell than buy through the lead underwriters in a sample of IPOs issued between 1999 and 2010 in the United States. Consistent with investors hiding their sell trades, the asymmetry is the strongest in cold IPOs and it is limited exclusively to the first month after the issue. The asymmetry survives when we control for any unobserved institution, IPO, and institution-IPO specific characteristics, including any relationship between institutional investors and underwriters. Contrary to the conventional view, the intention to flip IPO allocations is not an important motive for hiding sell trades from the lead underwriters; institutions that sell shares through non-lead brokers tend to have bought them through the lead underwriters in the IPO aftermarket, consistent with institutions breaking their laddering agreements.

Conferences/Presentations: FMA Conference (Boston, 2017), NYU Stern School of Business (2014), Northern Finance Association Conference (Ottawa, 2014), Midwest-Finance Association Conference (Orlando, 2014), EFMA "MERTON H. MILLER" doctoral seminar (Braga, 2011) 

 Using transaction-level data, I analyze information leakage of financial analyst recommendations to their elite clients, as well as characteristics of the institutional investors receiving such advance knowledge. I find that investment managers who have an established relationship with their brokers trade in the direction of the research in the 5-day period before the analyst coverage initiations. My results suggest that clients enjoying a privileged relationship with their broker receive and use the pre-released information in their trades.

The impact of CoCo bonds and Write Down bonds on banks risk appetite and investment policywith C. Aquila, G. Pratobevera and A. Ruzza.

  • Winner of the  Europlace Institute of Finance (EIF) and the Labex Louis Bachelier grant
Institutional ownership and analysts’ forecasting behavior

Presented at the 9th Swiss Doctoral Workshop in Finance (Gerzensee, 2010), Global Finance Conference in (Poznan, 2010), FMA European Conference Doctoral Consortium (Hamburg, 2010)
This paper brings together three parties: financial analysts, firms and their investors in order to shed additional light on analysts’ forecasting behavior. I use data on companies’ institutional holdings and find that analysts provide more accurate annual earnings forecasts for firms with higher institutional investor ownership. Furthermore, I find evidence suggestive of analysts’ strategic “up-down” bias when giving their forecasts for firms with high institutional ownership. I conclude that they tactically issue positively biased forecasts at the beginning of a period and give subsequent pessimistic forecasts. Analysts who apply this strategy give more informative forecasts than their peers. I also discover that analysts working for larger brokers and analysts with higher firm-specific experience are more likely to act strategically.
Remote forecasts and stock returns with Marina Druz

This study investigates the revelation of private information from analysts to the market. Consistent with previous studies we document that remoteness of earnings forecast from prior consensus (average of other existing forecasts) is positively correlated with accuracy. Therefore, we conclude that remote forecasts provide new information to investors. We document that purchasing (selling short) stocks in response to the forecasts significantly higher (lower) than the existing consensus, yields abnormal gross returns. The result holds after taking transaction costs into consideration. The returns are higher for the forecasts issued by analysts working for mid-sized brokers. Analysts from small brokers apparently remain unnoticed or have a higher likelihood to err; analysts from big brokers impact the market too fast.


Stock Market Liquidity and Trading Cost Factors, with Marie Brière, Charles-Albert Lehalle, and Amine Raboun - presented at Quant Vision Summit in Paris 2018